The Oil Manual: ‘Let the Oil Flow‘

Research evidence excerpt

The Oil Manual: ‘Let the Oil Flow‘

Global IdeaMDespite ongoing supply loss, physical market has softened

By now, the cumulative supply loss from the Middle East since 1 March has reached ~1.4

billion barrels across both crude oil and refined products, relative to the same period in

2025. Nevertheless, the Brent market has softened visibly in recent weeks.

This has not only been a story of Brent futures anticipating the Strait to re-open. Dated

Brent has come under pressure too, both the DFL and CFD curves have weakened in both

level and structure, physical diffs have softened, the cash Dubai premium has been on a

steady decline, and refined product cracks have mostly been on a downward slope too.

The stand-out here is the naphtha crack spread in Asia relative to Dubai crude; this has

fallen $13/b in the last four weeks to $(11)/b, close to its 1-year low - quite a counter-

intuitive weakening for a production for which 33% of seaborne supply has been cut off by

the Strait of Hormuz.

This weakening can also be seen in the overview of unsold cargoes. The table below

summarises indications of unsold cargoes over the last two weeks. To be clear, the oil

industry always has some cargoes that struggle to sell - it's part of the friction of buying

and selling. However, we would characterise the current level as higher-than-normal and

broadening. And that would be compared against 'normal' times. Considering that 11 mb/d

of crude oil production is currently shut-in across the Middle East, this is quite unusual

and highlights the physical weakness in the market.

Exhibit 5: We'd characterise the current number of unsold cargoes as above-normal

and broadening in recent weeks

High US exports, low Chinese imports...but little change expected in

June